ArcelorMittal (MT) Posts Loss, Sales Down

ArcelorMittal (ADR) (NYSE:MT) posted a net loss of $345 million in the first quarter of 2013, marred by the decline in demand of steel. The loss for the largest steel company compares to the $92 million profit in the corresponding period of 2012. The sales for the first quarter came in at $19.8 billion, a decline of 13 percent.

There were strong indications that any company which is dependent on demand from heavy industries, is poised to slip down on a multi-year slide. The steel shipments in the first quarter declined 6 percent year on year at 20.9 million metric tons. However, there was a surge in the shipments by around 5 percent compared to the fourth quarter of 2012.

The sales also declined year over year in the first quarter but increased around 2 percent from the last quarter of 2012.

Debt Factor

ArcelorMittal (NYSE:MT) is reeling under the massive debt load, which it put on itself in a series of acquisitions before the financial meltdown in the world. The Luxemburg based steel giant has reduced its net debt by $3.8 billion to $18 billion in the first quarter primarily by issuing $4 billion in shares and convertible subordinate notes.

Lakshmi N. Mittal, the company’s chairman and chief executive said that the company has been successful in cutting down its debt and plans, which the company is pursuing, are giving good results.

Improved European Performance

In Europe, the company has managed to cut down its losses in a vital unit producing flat steel for auto makers and other customers. This European unit recorded an operating loss of $59 million, as against loss of $283 million in the previous year’s quarter and $2.9 billion the fourth quarter of fiscal 2012.

The company has shuttered down the operations in Europe, primarily at Liège in Belgium and Florange in France due to weak demand and also some scuffle with government and unions. Last year, the government of France warned ArcelorMittal to nationalize the site in Florange. The company said that the blast furnace were closed in the Florange, but a new production facility for modern, lightweight automotive steel has been established under trademark Usibor.

Analysts Take

According to Thomas O’Hara who is an analyst at Citigroup, the EBITDA of the company was over the analyst expectations by around $200 million.

“There is a glut of steel supply globally,” said an analyst at Macquarie. “That is going to prevent a company like ArcelorMittal (NYSE:MT) from making the type of profits it did in its heyday.”